Geo-Economics and Politics

Ending Corruption: The Recovery of Trust

David Cruickshank, Global Chairman, Deloitte, United Kingdom; Michel Sapin, Minister of Economy and Finance of France; Vijay Shekhar Sharma, Founder and Chief Executive Officer, Paytm, India; Guy Standing, Research Professor in Development Studies, University of London, United Kingdom; Cobus de Swardt, Managing Director, Transparency International, Germany; Pedro Rodrigues de Almeida, Head of Basic Industries, Member of the Executive Committee, World Economic Forum and Rana Foroohar, Global Business Columnist and Associate Editor, Financial Times, USA speaking during the Session "Ending Corruption: The Recovery of Trust" at the Annual Meeting 2017 of the World Economic Forum in Davos, January 19, 2017Copyright by World Economic Forum / Manuel Lopez

Image: Manuel Lopez

Vesselina Stefanova Ratcheva
Head of Metrics, Communication Strategy and Coordination, World Economic Forum
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Corruption

This article is part of: World Economic Forum Annual Meeting
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Globally, institutions are experiencing a trust crisis. Last year, Edelman’s trust barometer highlighted that populations across the world had less trust in elites than ever before, with the standing of media being particularly hard hit. Distrust swelled after the financial crisis and has intensified with later events: revelations of the Panama papers, hacking scandals and political speculation with the general public’s understanding of facts. The year 2016 proved to be a year of disillusionment and anxiety.

Let’s start with a caveat; corruption has been around for a while. Deloitte’s David Cruickshank reminds us that in the Roman Empire the elite paid levies in lieu of taxes, generals would keep collecting money on behalf of dead soldiers and skim off the top from what was received for those still alive. Corruption can, in fact, be traced back to the time when agriculture was becoming established and priests suggested that farmers should give offerings at the temples. Corruption affects all countries across the globe – whether it is a deal in Nigeria or money-laundering in the United Kingdom.

But the global business and political community is increasingly standing behind making endemic corruption a thing of the past. This is reflected both in the inclusion of corruption into Agenda 2030, and in the fact that 90 vanguard CEOs of the World Economic Forum Partner companies have committed their time and efforts to the Partnering Against Corruption Initiative (PACI). International cooperation provides a key support system for those aiming to drive change – across the B20, International Monetary Fund and G20.

The drive towards reducing corruption recognizes its tangible costs to economies globally. Michel Sapin, Minister of Economy, Industry and Digital Affairs of France, says that governments with less corruption can increase money in government coffers – the presence of corruption creates the most unsustainable environment for growth, increasing efficiency in the economy and in government operations.

Companies are another common victim of corruption; notably those who play by the rules, craft exceptional products and services end up losing bids to those who do not play a fair game. Fighting corruption is not simply a case of doing the right thing morally, it is also good for business and government.

Transparency international defines corruption as “the abuse of entrusted power for private gain”, and it happens at varied levels. On the macro scale, Professor Standing from the University of London highlights the potential for corruption distortions in the functioning of central banks, alongside the wider system of rentier capitalism. Central banks can be seen to throttle the democratic nature of government, and rentier capitalism offers a discouragement to free markets, trade and competiveness.

Namely, central bank governors are not truly accountable to the electorate and too often there is a free flow of personnel between central banks and financial institutions. Patents, as one example of rentier capitalism, contribute to the formation of monopolies, dampening innovation. Other contexts in which corrupt practices can appear include covert lobbying, non-transparent public-private tendering, and non-transparent private deals in publically traded companies. In some developing countries, the presence of a cash economy poses a particular risk when it comes to transparency in the flow of capital. For example, Cobus Swardt of Transparency International emphasizes that in Africa with illicit trade seven times that of regular trade, the financial stripping of the continent is worse than during slavery.

No matter how troublesome the status quo, the participants noted they have seen times of significant public and political failure be repurposed over the course of 20- to 30-year periods. If you yield determination and a zero-tolerance approach, significant change can become a reality.

Technology and political will can go a long way in transitioning the existing system to one with less corruption. Other opportunities for reform lie in the possibility of increasing transparency in lobbying individuals and the details of contractual deals. On the level of company practices, the availability of whistle-blowing hotlines is on the rise and the wider anti-corruption community can act to scale successful practice.

Finally, while some companies continue to the push the boundaries of fair play, even when bad companies cannot be punished, more efforts can be extended in the direction of applauding the ones that remain above board.

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